Singapore Warns of Uncertain Economic Outlook
Zatrun Published at April 26, 2023

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has released its biannual Macroeconomic Review report, stating that the economic outlook for the city-state has become more uncertain. The report highlights that tighter financial conditions in the global economy and muted benefits from China’s reopening are weighing on demand. Despite the increased risks, the MAS has retained its view that Singapore’s economy will expand between 0.5% and 2.5% this year. If the news caught your attention, continue reading the content below.

Uncertain Economic Outlook

The MAS report points out that the risks to growth in the global economy and Singapore are tilted to the downside. The increase in banking industry stresses across global markets since March means lending conditions are expected to tighten even further, resulting in a sharper slowdown in credit growth and weaker economic activity.

US Technical Recession

The report also highlights the possibility of a technical recession in the US later this year, which is a major concern for Singapore’s trade-reliant economy. External risks have been a significant focus for Singapore this year, with the possibility of recession in the US and Europe still on the radar.

Impact of China’s Reopening

China’s reopening was expected to support trade in Asia, but according to the report, the benefits are yet to materialize. Outside of tourism, the boost from China’s reopening on Asian exports is projected to be relatively muted, and the overall contribution from China to regional manufacturing value chains will be weighed down by faltering global demand.

Inflation and Interest Rates

Although demand has fallen, the MAS has flagged that prices are expected to stay elevated. Core inflation, a key gauge tracked by the central bank, slowed for the first time since October, according to a separate report on Monday. However, the reading cooled to 5% in March from a 14-year-high of 5.5% in the previous two months. The MAS left its exchange-rate settings unchanged as inflation eases.

The fragile global growth outlook has led to more central banks pausing or ending their policy tightening campaigns. The MAS has not tightened its exchange rate policy since April 2016, and earlier this month, the MAS left its exchange-rate settings unchanged as inflation eases. Despite the uncertain economic outlook, the MAS has kept its growth view for Singapore between 0.5% and 2.5% this year.

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